November 2009

In a prime example of how entrepreneurial corrections can skew decisions about jail policy, Cameron County has decided to move 100 of its local inmates over 3 hours away to a private jail outside Corpus Christi. The reason? County officials want to ensure they have enough space to house federal detainees - a population that brings in money for the south Texas county. Here's the story from the Brownsville Herald("Nearly 100 Cameron County inmates going to Robstown," November 20)

The Cameron County Commissioners’ Court on Friday approved a contract with LCS Correctional Services Inc. that will allow the county to transfer nearly 100 inmates to the company’s privately run detention center in Nueces County. The inmates will be transferred to LCS’ Coastal Bend Detention Center in Robstown, said Gus Reyna Jr., chief deputy for the Cameron County Sheriff’s Department. ...

The inmate transfer is necessary for Cameron County to meet its commitment to the U.S. Marshals Service to provide space for 300 federal inmates in the county’s jail system, County Judge Carlos H. Cascos said.

While it may seem backwards to ship local jail inmates (some of whom are potentially folks not yet convicted of a crime) hours away from family, friends, and their attorneys in order to make room for federal detainees, it's a practice that we're likely to see more of with counties running their jails as profit-making entities much like private prisons. (In a related story, Cameron County's jails were recently skewered by Texas Jail Project's Diana Claitor in the pages of the Texas Observer("Heaven and Hell in Cameron County," November 13).)

The Corrections Corporation of America (CCA) held its latest investor call earlier this month.There were no big surprises on the call except that the company reported on how changes at the T. Don Hutto facility were impacting CCA’s bottom line.

We have covered previous CCA investor calls this year.Given the nation’s current outlook, the private prison profiteers are not planning on building any new speculative prisons right now.During the call they mentioned over 8,000 beds that are going unused.This is a significant portion of the more than 86,800 beds that comprise the company’s inventory in its 44-owned prisons or 21-managed only facilities.

During the call, company officials discussed the recession and the impact of state budgets on their ability to find new customers.State prisons continue to be overcrowded – according to reports 29 states are operating at 100% capacity or more.CCA has an interesting take on the state prison crisis.Rather than building new prisons or even obtaining new contracts, many states – like Texas – have responded with policy changes.In some instances those changes involve parole reforms and identifying changes to early release practices.But CCA officials believe that states are having a harder time implementing these changes than officials thought they would.So they are watching state policy changes pretty closely to determine changes in demand and potential new customers.

As a result of the state outlook, CCA officials are focusing on federal customers.Their primary customer targets are Immigration Customs and Enforcement (ICE), United States Marshall Service (USMS), and the Bureau of Prisons (BOP).The BOP continues to operate at 137% capacity.CCA thinks there may be an opportunity to consolidate detention beds in centralized facilities – currently about 12,000 detainees are imprisoned in over 150 jails that do not meet new detention standards.As a result, the company believes there is an opportunity to obtain new contracts with ICE.

The most relevant issue for Texas may be changes in family detention at Hutto. Now that the medium security prison is detaining immigrant women it seems that CCA can’t charge the same per diem rate to ICE as when it locked up families including small children.The CCA profiteers seemed most concerned.

The economic outlook continues to delay speculative prison construction.But it hasn’t changed the world view of the profit minded folks at CCA.Let’s hope that stakeholders who don’t stand to profit will continue to challenge how we respond to crime and not listen to the folks at CCA or other companies.

Recently, a reader asked us what the latest prison numbers are for Texas and the nation.The Sentencing Project (disclaimer – these people pay me every few weeks) provides the latest numbers on their website and has a nice overview here.

From TSP:

Total U.S. prison and jail population: 2.3 million

Prison only: 1.5 million

Jail only: 781,000

Total Texas prison and jail population: 233,599

Prison only: 162,000

Jail only: 71,599

Update: Thanks to our pal Scott Henson at Grits for Breakfast for bringing to our attention that the jail numbers were actually 71,599 on November 1st. As I mentioned previosly these numbers are updated monthly and can be found at the link below. The jail population number for December 1st is not available yet.

Folks can visit TSP online to get additional numbers on the nation’s prison population.And the following sources provide a wealth of information in terms of data and analysis in Texas and at the national level:

Emily Ramshaw at the newly-launched Texas Tribune has a series of three stories this week on the state of health care and mental health care in private immigrant detention centers in south Texas, including the GEO Group's South Texas Detention Center in Pearsall and MTC's Willacy County "Tent City" lock-up in Raymondville.

Ramshaw's first article ("Mental Hell," November 16) details the lack of mental health providers at the many large south Texas immigrant detention centers:

[GEO's] South Texas facility, one of several federally monitored Texas lock-ups for immigrants awaiting deportation hearings, is hardly the only one with mental health staffing problems. A Texas Tribune review of five of these facilities found just three had a staff psychiatrist, despite housing a combined 5,500 detainees.

In part two ("Health Scare," November 17), Ramshaw tackles health care and staffing problems at both GEO's South Texas facility in Pearsall and MTC's notorious Willacy "Tent City" prison in Raymondville, the country's largest immigrant detention centers.

A 2007 review of medical care at the Willacy Detention Center in Raymondville found medical staffing was “barely adequate,” and that the facility’s clinic was too small to care for its 1,800 detainees. Twenty of the facility’s 46 health care positions were vacant. The detention center had no clinical director, dentist, pharmacist or psychiatrist. Half of Willacy’s licensed vocational nurses hadn’t even completed new employee orientation.

In part three (Andre's Story, November 19), the Tribune lets a former detainee, Andre Osborne, tell his own story in the form of a video. Check it out:

Over all, this coverage is very promising from Ramshaw and the Texas Tribune. We'll keep you posted on developments.

The private company that operated a downtown Beaumont jail facility has ended it's contract with Jefferson County.Officials say the facility has been temporarily closed.

The Geo Group announced the move on Monday, November 9, 2009 and county officials are now seeking bids for a replacement company. The jail has earned the county more than a million dollars a year in revenue, and sheriff Woods says there could be repercussions for a county contract to house Harris County inmates.

The GEO Group recently held their Quarter 3 investor conference call for the year. As usual, the call started off with the basic financial information. Their quarterly revenue went up from last quarter, $276 million to $295 million, with a projected Q4 revenue of $313-318 million. However, their average domestic U.S. per-diem fell from last quarter, down 24 cents to $53.73 from $53.97. The executives were eager to reassure their investors that with their average of $67.00 for their international per-diem rates that the drop was not a problem for them overall. Most of the conference call was centered about the next topic: that the company is suffering drops in occupancy rates. The average occupancy rate for Q3 was 95%, down from 97% last year at this time. Their initial response was that this rate had fallen because the company just added a lot of additional beds. However, investors were not taking the bait on this one, as empty new beds are just as detrimental to profit as old empty beds. This comment was odd, because an investor asked about the company's view of speculatively building prisons, to which GEO Group CEO George Zoley replied, "we will not proceed with any speculative building in advance of any contract award...that's not to say we are not prepared for any future opportunities." If the company wasn't interested in speculatively building, why would they have brand new empty prison beds that are hurting their occupancy rates? When one investor asked what the real problem was, Mr. Zoley replied:

"Our ten state customers have had budget cutbacks this year that we are already living with. From my view, I really just see a continuation of that same situation. Our performance this year has already been impacted to some extent by state economic difficulties and if you look at our occupancy, where it has historically been at 97% it's only 95% so if the states weren't having their current problems our performance would be even higher than it presently is by virtue of the occupancy. But it is what it is, and I really just see a continuation of the current situation."

It was interesting that he claims that he foresees a continuation of State hardships during an investor meeting. Honesty may be the best policy in this case though. State hardships can open the door for desperate state-owned facilities to go up for sale, as in the case of Arizona, even though privatizing the state's corrections department ultimately saves little (if any) money in the long run. An investor asked Zoley about Arizona and their tentative proposals and whether or not The GEO Group had plans to contract with the state:

"There's certainly a lot of movement towards that direction. The state has a severe budget deficit and a recent public article has indicated that all the departments would have to take almost a 15% cut unless new money is found, and the sale/leaseback initiative as well as the concession agreement initiative are a means of which to provide that additional funding. And if this process is successful in the state of Arizona, it could be a game-changer for our industry because I think it will be quickly emulated by several other states around the country."

The sale/leaseback initiative is a way for Arizona to essentially sell an asset (in this case their entire prison system) to a private entity (say, The GEO Group) and then the state would lease the asset back over time (until the budget has leveled itself out, ideally). Arizona would receive an initial lump sum from the sale of the asset from The GEO Group, which would help their deficit, and then Arizona would slowly buy back the asset over a contractually specified amount of time. This may sound like a good idea for Arizona at first, but over a long period of time it is likely that they will have to pay back more money to The GEO Group than they received in the original lump sum in order for the deal to be of interest for GEO.

If Arizona does this, it would indeed be a game changer for The GEO Group. Deals like this allow prison companies to obtain property quickly, without having to construct a facility; as well as easy ways for a State to receive significant revenue without permanently selling off their assets. When the asset has been leased back from the state, GEO can move on their merry way, having made a fortune from the per-diem rates and the leaseback (with interest) and with minimal upkeep cost. Arizona has already started this procedure with some office buildings, but not yet for prison facilities.

Overall, The GEO Group's Q3 call was not as positive as the Q2 conference call. The executives gave off a confident presence but had an underlying tone of skepticism towards the prison market. This might be why GEO's COO Wayne Calabrese sold 31,000 shares of company stock at $18.83 a piece on September 10th and the CEO George Zoley sold 45,000 shares of GEO stock at $21.71 a share on November 9th ("The GEO Group Inc. (GEO) Chairman and CEO George Zoley Sells 45,000 Shares," Guru Focus, 11/09/2009). Either these men know something we don't, or their mortgages were past due. Regardless, whatever is said by the chairmen during these quarterly meetings does speak louder than these actions.

On October 23rd, an inmate escaped from Community Education Centers' (CEC) Kinney County Detention Center in Brackettville, TX. The inmate, Manuel Guardiola, is an alleged member of the Mexican Mafia who bribed the facility's guards in order to escape. With Brackettville's location about 30 miles from the Mexican border, it is assumed that the inmate, still at large, has returned back to Mexico ("Mexican Mafia soldier escapes from Texas jail," October 26, 2009, Examiner). Shortly after the escape, the warden of the facility, Mickey Hubert, resigned from his position on November 2nd. Additionally, CEC closed down the facility temporarily with no word on if or when they plan to re-open, leaving all employees (even the ones not involved with the bribery) without work. The U.S. Marshals moved the remaining inmates who were left behind to other nearby facilities.

This incident was the second major problem for the Kinney County Detention Center under the watch of Hubert. In late December of last year, inmates refused to return to their cell and set fire to mattresses, causing a riot and requiring multiple state resources to quell the outbreak. Adan Muñoz, Director of the Texas Commission on Jail Standards, told me that the guards who work at the facility are not gang members of the syndicate. This fact rules out the possibility of the guards colluding with the inmates in either the riot or the escape and points more to the incompetence of those particular CEC employees at Kinney County Detention Center involved with the bribery. This is not surprising, considering the general lack of labor benefits received as a private prison employee, that one would be quick to accept a bribe in times of economic hardship. However, the actions taken by the guards involved with this breakout are reprehensible.

Southwestern Correctional's Burnet County jail drew a fairly sharp rebuke from Texas Commission on Jail Standards' head Adan Muñoz for apparently not providing medical care to a pregnant inmate, amongst other problems. According to a KXAN story ("Surprise jail visit uncovers new issues," October 20),

On a surprise visit last Thursday, jail inspectors found concerns inside after questioning two female inmates. One was pregnant and said she was not given proper medication. Another mental health patient said she was not given her medicaiton either, so inspectors checked her medical chart.

"There were certain medications that needed to be prescribed for her that had not been given to her, and that's obviously not in compliance with jail standards," said Adan Munoz, executive director of the Texas Commission on Jail Standards .

"They get excellent care here," said Tammy Manning, the Burnet County Jail medical supervisor. Manning was out of town during the inspection but normally sees the inmate who she said had been refusing to show up to appointments after they were scheduled. The situation had not been documented on her medical chart that state inspectors reviewed. "We do have room for improvement in our documentation," said Manning. "And our actional plan we put into place Friday was to improve our documentation so this will not happen again."

One of the female inmates also said they were not getting recreation time everyday. "We went on to check the recreation log to see if their concerns were valid," said Munoz. "We couldn't even find a recreation log." Burnet County Jail Warden Bruce Armstrong admits there was a breakdown there, too.

"We run rec everyday," said Armstrong. "And the officer calls in the count to the central control officer whose suppose to be logging the count down on how many offenders went to rec, and they were neglecting to document the count."

Armstrong said it has been taken care of, but the state said there is one more requirement the county has yet to comply with.

The state does not have the jail's operational plan, which covers everything from what to do in case of a fire to how to administer health care. "The fact that it's been open since April and still not within our agency certainly gives us great concern," said Munoz. The county told the state they were working on it. Munoz sent written notification of the deficiencies to the county and Southwest Corrections, the company who manages the jail. They have 30 days to comply.

Southwestern's Burnet lock-up was deemed non-compliant by TCJS in September after an escape lead to an inspection. At that point, Muñoz said “The best way to describe it is a lack of diligence, a lack of professionalism." The facility drew broad opposition in Burnet County even before it was built with residents siting the now proven downfalls of private jail companies and potential dangers in floating debt for private jail expansion. We'll keep you posted on Burnet's continuing problems with Southwestern Correctional.